Cash for Keys – New Short Sale Incentive

Cash for Keys short sale incentive

Homeowners who are underwater in their mortgage loans will have another option to home foreclosure beginning April 5.   In this case, they can get cash for their keys.

On April 5, the U.S. Treasury Department will launch the Home Affordable Foreclosure Alternatives Program (HAFA). The program is aimed at streamlining and reducing the paperwork needed for a short sale.

A short sale is where a homeowner sells the property for its current market value, which is usually less than what is owed on the mortgage. Lenders must agree to the short sale since the borrower will be repaying less than what they owe to the lender. In return for accepting the short-sale, both the lender and seller would get a cash incentive, which is why the program has been nicknamed “cash for keys.”

Realtors are hoping the program will “revolutionize the short-sale situation,” which historically has been a long, arduous process taking an average 90 to 120 days, according to the National Association of Realtors.®  In that time, a buyer can lose interest.

Why Cash For Keys?

Much like the federal government’s home loan modification program, the short sale program, which ends on December 31, 2012, is aimed at reducing the number of home foreclosures and improving the housing market.

According to the National Association of Realtors®, at its peak in March 2009, bank-owned sales were 31 percent of the housing market versus 18 percent for short sales.

Again, Realtors say this is because the short sale process is so long and complicated, a buyer usually gives up, and the bank ends up foreclosing on the home.

The government is hoping HAFA will change that practice, and bring about lasting-change to the housing market.

Under the new rules:

  • A lender must approve or deny a purchase offer within 10 days of it being submitted.
  • An acceptable value of the home, based on an appraisal or broker’s price opinion, must be accepted by the bank up front.
  • A seller may stop paying all mortgage expense once the lender approves the short sale.
  • A seller is entitled to up to 1,500 dollars for relocation expenses from the government at closing.
  • The bank will not only forgive the remainder of the mortgage, but unpaid payments will not be shown as late on credit reports.
  • To qualify for the program, a seller must be unable to meet the requirements for a loan modification under the Home Affordable Mortgage or afford a home loan modification.

More details on the Home Affordable Foreclosure Alternatives program (HAFA).

Source: Nicole Service from

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